The Impact of Online

Video in Europe
a Parks Associates white paper
 The Impact of Online Video in Europe
© 2009 Parks Associates

Attribution
Authored by John Barrett
Published by Parks Associates
© February 2009 Parks Associates
Dallas, Texas 75230
All rights reserved. No part of this book may be reproduced, in any form or by any
means, without permission in writing from the publisher.
Printed in the United States of America.

Disclaimer
Parks Associates has made every reasonable effort to ensure that all information in this
report is correct. We assume no responsibility for any inadvertent errors.

Attribution and Disclaimer i

 The Impact of Online Video in Europe
© 2009 Parks Associates

Table of Contents
1.0 Broadband Adoption and the Shift Online ............................................................ 1
2.0 The Reluctant Consumer...................................................................................... 4

List of Figures
Figure 1 Video Viewing Activities in Western Europe...................................................... 2
Figure 2 Changes in Video Viewing Habits ..................................................................... 3
Figure 3 Preferred Method for Watching Videos ............................................................. 4
Figure 4 European Attitudes toward Video Viewing Options ........................................... 5

Table of Contents and List of Figures ii

 The Impact of Online Video in Europe
© 2009 Parks Associates

1.0 Broadband Adoption and the Shift Online

Broadband adoption has significantly grown in Western Europe. Over the past three
years, the U.K., Italy, Spain, Germany, and France added roughly 50 million new
broadband households. Regulatory reforms in the U.K. and France particularly helped
boost penetration by creating strongly competitive markets. As a result, a large and
growing number of households can now view video online, and the door is open to
alternative forms of video distribution.

What has been the impact of these changes? Traditional distribution methods still
dominate video viewing. The percentage of broadband households going to the cinema
or watching videos on DVD far exceeds the percentages for their nascent online video
habits. Yet the latter are not insignificant. Over 20% of European broadband households
have watched a film or TV program online within the past six months.

The challenge is that most of this viewing is not generating revenues directly. The
percentage of households purchasing or renting videos via the Internet is substantially
smaller than the percentage viewing and downloading videos for free. In part, this free
viewing is through legitimate advertising-based models, which are proving to be more
popular than direct payment models.

At the same time, Europe continues to have a lingering piracy problem. Stricter
legislation in Italy appears to be having an impact, but the country still ranks far ahead
of the U.K., France, and Germany in terms of “free” video downloading. Spain is also
one of Western Europe’s “bad boys” of piracy. In Spain, “free” video downloading
exceeds even DVD use. The country is signaling a desire to address its pervasive
piracy problem, but the issue still persists.

Broadband Adoption and the Shift Online 1

 The Impact of Online Video in Europe
© 2009 Parks Associates

Video Viewing Activities

"In the past 6 months, how many films or TV programs etc. have you…?"
(Among broadband HHs in specified countries)
100%
U.K. Italy Spain Germany France
% Engaging in Specified Activity

80%
At least Once

60%

40%

20%

0%
Watched in Purchased Rented on Downloaded Watched Watched Purchased Rented in
the cinema on DVD DVD from the over the using video- in form of an form of an
Internet for Internet on-demand Internet Internet
Source: Entertainment 2.0 in Europe free or pay-per- download download
© 2009 Parks Associates view

Figure 1 Video Viewing Activities in Western Europe

What will be the future impact of increasing broadband penetration? Here we see the
true challenge that is shaping up for the online video market in Europe. Consumers
generally anticipate there will be a shift from traditional video distribution methods (i.e.,
cinemas and DVDs) to online video sources. However, they are shifting to the free
online video sources (both authorized and unauthorized) rather than those that charge
fees. This direction obviously presents challenges to content providers.

Broadband Adoption and the Shift Online 2

 The Impact of Online Video in Europe
© 2009 Parks Associates

Changes in Video Viewing Habits

"How would you characterize the frequency at which the following activities
are taking place today compared to two years ago?"
(Among broadband HHs in specified countries)
40%
U.K. Italy Spain Germany France
% Changing their Video Activities
(% Increase - % Decrease)

20%

0%

20%

40%
Downloading Streaming Purchasing Renting online Purchasing Watching Renting DVDs
online online online video video DVDs films in the
films/TV films/TV downloads downloads cinema
programs for programs Source: Entertainment 2.0 in Europe
free © 2009 Parks Associates

Figure 2 Changes in Video Viewing Habits

The conundrum they face is that consumers, by and large, still prefer to watch video
through traditional channels. When asked, an overwhelming majority of European
broadband users would rather watch video through TVs and DVDs and at cinemas.
Only a small minority would choose online sources.

Broadband Adoption and the Shift Online 3

 The Impact of Online Video in Europe
© 2009 Parks Associates

Preferred Method of Watching Videos

"If all of the following options were available to you, how would you prefer
to watch a film, program, etc.?"
(Among broadband HHs in specified countries)
Pay to watch on the
100% Internet

Rent online downloads

80% Purchase online

downloads

Watch VoD at home

60%

Watch free on Internet

w/ ads
40%
Rent DVD

Purchase DVD
20%

Watch it free on TV w/
ads
0%
See it in the cinema
U.K. Italy Spain Germany France
Source: Entertainment 2.0 in Europe
© 2009 Parks Associates

Figure 3 Preferred Method for Watching Videos

2.0 The Reluctant Consumer

So why is the number of online viewers higher than preferences would otherwise
indicate? One cause is a simple substitution effect. The Internet offers alternative forms
of entertainment, online video being just one of them. Whereas European consumers
overall still prefer to watch videos offline, time spent going to the cinema and watching
DVDs is decreasing due to increased Internet use.

A second consideration is the “free factor.” A notable percentage of broadband users

say they watch videos online only because they are free. The percentage who would
rather pay for a download than a DVD is quite small. Even a general test of home vs.
cinema viewing is revealing—a lackluster percentage of consumers prefer in-home
viewing.

The Reluctant Consumer 4

 The Impact of Online Video in Europe
© 2009 Parks Associates

Attitudes Toward Video Viewing

"Do you agree with the following statements?"
(Among broadband HHs in specified countries)
50%
I prefer to watch new films at home rather than in the cinema
I watch/download videos from the Internet because they are free
I would rather pay to download than purchase a DVD
(i.e. Ratings of 6-7 on a 1-7 scale)

40%
I would rather watch online than watch on TV
% Strongly Agreeing

30%

20%

10%

0%

U.K. Italy Spain Germany France

Source: Entertainment 2.0 in Europe
© 2009 Parks Associates

Figure 4 European Attitudes toward Video Viewing Options

All of this is to say that European consumers are shifting to online distribution channels
somewhat against their will, and as such, it will be difficult for the industry to coax
revenues from them directly. People generally are not willing to pay for entertainment
options they accept only with reluctance.

A change in consumers’ video habits is coming but not in the way that most players are
hoping for. Addressing Europe’s piracy problem is clearly a priority, but content
providers should not give up on traditional distribution channels. If the lure of “free”
content can be removed, European consumers may revert back to their preferred habits
watching DVDs and going to cinemas.

The Reluctant Consumer 5

 The Impact of Online Video in Europe
© 2009 Parks Associates

About the Author

John Barrett currently analyzes digital media and international trends for Parks
Associates and also heads the company’s consumer research team. He regularly
advises companies from both the content and hardware industries on their digital media
strategies and has authored dozens of industry reports.
He holds an MA in international economics from the Johns Hopkins University: School
of Advanced International Studies (SAIS) and a BS in international affairs from
Georgetown University.
Industry Expertise: International Research, Digital Media, Mobile TV, Social Media,
User-generated Content, Web 2.0.

About Parks Associates

Parks Associates is an internationally recognized market research and consulting
company specializing in emerging consumer technology products and services.
Founded in 1986, Parks Associates creates research capital for companies ranging
from Fortune 500 to small start-ups through market reports, primary studies, consumer
research, custom research, workshops, executive conferences, and annual service
subscriptions.
The company's expertise includes new media, digital entertainment and gaming, home
networks, Internet and television services, digital health, mobile applications and
services, consumer electronics, and home control systems and security.
Each year, Parks Associates hosts executive thought leadership conferences
CONNECTIONS™, with support from the Consumer Electronics Association (CEA®),
and CONNECTIONS™ Europe. In addition, Parks Associates produces the online
publication Industry Insights in conjunction with the CONNECTIONS™ Conference
series.
http://www.parksassociates.com | http://www.connectionsconference.com |
http://www.connectionseurope.com | http://www.connectionsindustryinsights.com

About CONNECTIONS™ Europe Summit

CONNECTIONS™ Europe Summits, produced by Parks Associates, provide
attendees with high-level analysis and consumer research, networking opportunities,
and information on emerging residential and mobile technologies and services. Each
focused event creates a forum where executives can learn about vital international
trends, successful strategies, and key players in the development of digital living
technologies.
The next CONNECTIONS™ Europe Summit will take place March 31, 2009, in Nice,
France. http://www.connectionseurope.com

About Parks Associates 6